You know the old saying – Bulls make money, Bears make money and Pigs get slaughtered.
Well, take a look at this graph from the World Bank:
It seems like Iceland is Pig number 1. Look at who is number 2!
The chart is measuring domestic credit as a % of GDP, or the extent to which the nation as a whole is leveraged. These are 2005 numbers and significantly understate the current numbers, which in the US have been reported as being at 435%. That means for every real $ in circulation there is $4.35 in credit.
I’m not saying that USA Inc. could go bankrupt, like Iceland. But, the nation whose currency provides the basis on which world trade happens is clearly at a crossroads. As a Brit, we learned about this in history – the end of empire and all that.
If the current crisis is significant in the future it may be because it is the time when the world realized that it no longer has a leader. In the case of Britain that happened in the 1870s. It took two world wars and the great depression for the world to get to a new equilibrium. I hope this time it is less painful, and happens more rapidly.
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